Barbados, like virtually all jurisdictions, has experienced the economic and financial challenges posed by the COVID-19 pandemic. Like many others, these challenges have been compounded by the presence of natural disasters such as hurricane and volcano, adding to the stress of the pandemic.
In its recent country report, the International Monetary Fund (IMF) recognised that while Barbados is not as exposed to natural disasters as some other Caribbean countries, climate change vulnerabilities are likely to increase and could have a major impact on the economy. In an effort to counteract these potential negative impacts and, indeed, the costly damage from the dust of the recent La Soufriere volcano in St. Vincent, Barbados had already been provided with an advance protective framework. In that regard, it had implemented various mitigation strategies to support a "green" recovery which increase structural and post disaster resilience. Hence, in the infrastructural areas of electricity and transportation, increased spending had been allocated thereby supporting improved electricity transmission and climate friendly transport. Furthermore, the jurisdiction has continued to actively participate in regional resilience related institutions such as the Caribbean Catastrophic Risk Insurance Facility and the Inter- American Development Bank with its contingent credit facility. In this regard, it is all part and parcel of Barbados' striving and recovery.
Gradual Economic Recovery
Against this background of hope and expected fulfilment, the IMF and local policy makers have fully recognised that the risk potential of a third wave of COVID-19 and a slower than projected regeneration and recovery of global tourism loom large as two potential impediments. Cautious assessment would indicate that economic recovery for Barbados could be gradual over the three year period of 2021 to 2024 before actual return to the jurisdiction's "medium term average growth rate".
The Fund has, however, recognised in its report that pre pandemic crisis, Barbados had brought down its public debt "with the mixture of a strong fiscal adjustment, comprehensive debt restructuring, improved management of public finances and growth enhancing structural reforms". However, the pandemic has caused a rise in public debt from 157 per cent of GDP at the end of the financial year 2020 - 2021. The Fund estimates that the target date for reaching the desired 60 per cent debt to GDP ratio will now be 2035-2036 rather than 2033-2034 as originally anticipated.
However, to reach this type of recovery, the Fund is still advocating the need for the jurisdiction to take the important steps which are not new but no less important: keeping higher primary balance in future years; phasing out crisis spending as recovery continues; restraining grants to state owned enterprises as recovery becomes more ingrained; implementing expeditiously the new Public Finance Management Act by making operational a comprehensive action plan for public financial management; further strengthening of the administration of customs and revenue administration.
Structural Reforms Will Enhance Growth
The Fund has also recognised that structural reforms are capable of enhancing growth as part and parcel of the reach for recovery. In that regard, it favourably recognises the promised establishment of a commercial court which can assist significantly in the creation of litigant and public confidence in the adjudication of business disputes. Indeed, the presence of available arbitration and mediation services through the Barbados based Arbitration and Mediation Court of the Caribbean (AMCC) already serves to enhance this required level of confidence through a dedicated and professionally run dispute resolution centre with a global panel of recognised arbitrators. The planned introduction of a Fair Credit Reporting Act will also serve to improve the access to credit for small and medium sized enterprises. Recovery will require a sound measure of inclusiveness and comprehensiveness within and across the business spectrum.
Yet another area which will engender very significant confidence relates to the fundamental changes now under consideration for the Financial Services Act. Essentially, they seek to enable the Financial Services Commission to become a signatory to the International Organisation of Securities Commissions Enhanced Multilateral Memorandum of Understanding concerning consultation and cooperation and the Exchange of Information (IOSCOE-MMOU); enable the Financial Service Commission to become a signatory to the International Association of Insurance Supervisors Multilateral Memorandum of Understanding (IAISMMOU); give greater rigour and confidence to the Commission's regulatory power. While the two latter objectives are to a large degree instrumental, the third objective will be made certain not only by legislative change but also by the efficiency combined safely with speed which attracts and maintains the high quality business which will assist in the reach for recovery.
At a more discrete level, Barbados will still be required to pursue policies which take advantage of its own individual comparative strength combined with potential and real global areas of post pandemic growth - such must be the reach for recovery. For Barbados is still ranked by the World Bank as high income despite its significant economic and financial losses brought on by the pandemic. This most recent post pandemic ranking is based on its having gross national income (GNI) of more than US$12,696, and places it in a category with the United States, United Kingdom, Canada, Japan, Italy and Spain - together with the small Caribbean Community (CARICOM) jurisdictions, The Bahamas, St. Kitts and Nevis, and Trinidad and Tobago.
Notwithstanding this classification, which will be reassessed following the Bank's annual reassignment reclassification next July, Barbados was still fortunate to receive a US$200 million loan as an exception and as a result of the economic and financial harm it suffered from COVID -19. The loan will surely be carefully administered but the jurisdiction will be seeking to also tap into increasing trade to new and potential niche markets; to taking advantage of potential and ongoing public private partnerships; to striving to benefit from electronic commerce opportunities; to reengineering its agricultural focus for increased domestic production use and distribution; to increasing its renewable energy opportunities and realities; and to redirecting and realigning its tourism policies and practices particularly in the area of the new "welcome stamp" variety and its heritage tourism thrust.
Some of these new reaches for recovery pose certain intrinsic challenges. In the area of ecommerce, Barbados will need to undertake certain connectivity and general technology infrastructure upgrades. The legal and regulatory frameworks will also need to adapt and recognise the various new protocols and procedures. The technological developments which have allowed the "FinTech" and other non-banking firms to provide payment services such as mobile money will gain more usage as Barbados strives to enable persons in depositing, storing, transferring, and withdrawing money without the use of a bank account. While the model is now in use in most jurisdictions, it still creates a range of challenges to existing legal systems as they seek to promote and protect a stable payments and financial system.
The reach for recovery will, in essence, be one which mixes policy with systemic reform and new practices with reengineered procedures.
Sir Trevor Carmichael KC
Sir Trevor Carmichael, KA,LVO,KC. was born in Barbados and educated at Harrison College and the University of the West Indies, Mona, Jamaica. After pursuing post graduate studies in the United States, he was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar in December of 1977. He is a member of the International Bar Association, the Inter-American Bar Association and a Committee Member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association, the International Fiscal Association and was one of the parties responsible for establishing a Barbados Chapter of the International Fiscal Association of which he is Charter President. He is the Barbados Country Chairman of the International Litigation Committee on Business Law of the International Bar Association and a former Deputy Secretary General of the International Bar Association. He is a Life Fellow of the Institute for Advanced Legal Studies in the United Kingdom, a Life Member of the Commonwealth Magistrates and Judges Association and a member of the International Law Association.